Fears carbon tax may ground Rex flights

Regional airline Rex says it will be forced to review its presence even on some of its major routes if the Federal Government does not review its carbon tax plans for the sector.

Rex yesterday announced an $18 million profit before tax, on the back of strong performance in the mining sector and from its subsidiary Pel-Air winning Victoria's air ambulance contract.

However, the company's Warrick Lodge says falling passenger numbers, started by the global financial crisis, are continuing, even on solid routes like Mildura.

He says the airline environment has become toxic and the global slowdown and Federal Government policies threaten to wipe out regional aviation to all but the biggest centres.

"Unfortunately there comes a time when we hit a tipping point and we are unable to sustain those more affordable fares, which is what sustains the passenger growth on our regional routes, so it's quite alarming for us," he said.

He says the airline is facing a $5 million hit in July from the carbon tax and removal of the Federal Government's on-route rebate scheme.

"Which is seeing us internally having to ask some serious questions, like do we refocus our attention on fly-in, fly-out activity where we know there are the margins as opposed to flying between cities and regional communities for a loss?" he said.